How Groupon Is Trying To Win Back Small Businesses

The daily deal site is trying to make friendly with small-business owners—but will it be enough to turn around their fortunes?

Many small-business owners have a love-hate relationship with Groupon (and, to be fair, with “daily deal” or “flash sale” sites overall). On one hand, they can be a great marketing tool and reel in new customers. On the other, daily deal sites force businesses to undercut their own prices and can lead to a frenzy of negative online reviews if the business can’t handle the business surge generated by the deals.

Groupon sales reps have also gotten a bad rap for being aggressive. A Groupon sales rep was suspended last week for apparently threatening via email to have his friends post negative reviews on Yelp.com of a San Francisco restaurant, Sauce, after the restaurant’s owner criticized him.

But despite the recent bad publicity, the company is trying to reignite its early success with small businesses by rolling out new programs. CEO Eric Lefkofsky recently told the Los Angeles Times that he is trying to transform Groupon from a daily-deals site into a global e-commerce giant. What are some of the initiatives the company has announced recently to try and reinvent itself?

Expanding its affiliate marketing efforts. The company recently introduced Groupon Partner Network, which will let people put ads for Groupon deals on their blogs or Web sites. For example, a New York restaurant blogger might get ads for New York restaurant deals posted on their site. When someone clicks the link and makes a purchase, that affiliate gets a 2 percent to 10 percent commission based on what was sold, whether it was a new or existing customer, and the overall sales volume of the affiliate.

Letting customers book restaurants online. The company recently introduced Groupon Reserve, which lets iPhone users of its mobile app make reservations and local restaurants while claiming deals. The company hopes the new service will revive interest among local restaurants for offering deals and compete with LivingSocial's food take-out program that was introduced last year.

Questions certainly remain over whether Groupon can succeed in changing its business model and winning back small-business owners who have sworn off daily deals. It will likely depend on whether the company can convince businesses that offering daily deals is worth the potential risks.